Asian stock markets experienced a dramatic plunge on Monday, as the far-reaching impact of US President Donald Trump’s newly implemented tariffs sent shockwaves across the region. Major indexes from Shanghai to Tokyo and Sydney to Hong Kong all registered significant losses, prompting one analyst to describe the situation to the BBC as a “bloodbath.”
The sell-off reflects the acute vulnerability of Asian economies, which serve as major global manufacturing hubs, to the newly imposed tariffs. Furthermore, the region is particularly sensitive to fears that the escalating trade tensions could trigger a significant slowdown or even a recession in the United States, the world’s largest economy.
Japan’s Nikkei 225 index closed with a steep 7.8% decline, while Australia’s ASX 200 shed 4.2%, and South Korea’s Kospi ended the day 5.6% lower. Markets in mainland China, Hong Kong, and Taiwan witnessed even sharper falls as investors reacted to the substantial drops seen in other global markets on Friday, a day when they were closed for public holidays. The Shanghai Composite closed down by 7.3%, the Taiwan Weighted Index plummeted by 9.7%, and the Hang Seng in Hong Kong was down by a staggering 12.5% in afternoon trading.
“Tariffs are feeding into expectations around inflation and a recession,” explained Julia Lee, head of client coverage at FTSE Russell.
The growing anxieties are echoed by leading financial institutions. Goldman Sachs has increased its forecast for a US recession within the next 12 months to 45%, up from a previous estimate of 35%, and has lowered its economic growth outlook for the country. Similarly, JPMorgan now projects a 60% chance of a US and global economic downturn.
A significant weakening of the US economy would have dire consequences for Asian exports, given the US’s crucial role as a primary market for goods from the region. “Asia is bearing the brunt of the US tariff hike. While there could be some room for negotiation, a new regime of higher tariffs are here to stay,” commented Qian Wang, Asia Pacific chief economist at Vanguard. “This is negative to the global and Asia economy, especially those small open economies, both in the short term and long term.”
Countries like Vietnam and Bangladesh, which have become heavily reliant on the US as an export destination, face particularly high tariffs under Trump’s latest announcement, with levies of 46% and 37% respectively. Major US brands, including Nike and Lululemon, have significant production in Vietnam, while Bangladesh’s garment exports to the US amount to $8.4 billion annually.
Frank Lavin, a former US undersecretary for international trade, highlighted the disproportionate impact on Asia, stating, “Asia is likely to feel a disproportionate brunt of this turmoil because Asia sends more exports to the US than to other markets.”
The turmoil in Asian markets follows a deep downturn in global equities on Friday, triggered by China’s retaliation to Trump’s initial tariff announcements. All three major US stock indexes fell by over 5%, marking the worst week for the US stock market since 2020. In the UK, the FTSE 100 experienced its steepest fall in five years, and similar declines were seen in Germany and France.
Ms. Lee of FTSE Russell warned that the global stock market rout is likely to continue, noting that “US futures trading lower point to another hard session on Wall Street tonight.” The global stock market has already lost trillions in value since President Trump announced sweeping new 10% import taxes on goods from all countries, with significantly higher rates imposed on key trading partners, including China, the European Union, and Vietnam.
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